Wednesday, November 2, 2011

Report: Qantas to Cut Fares to Win Back Passengers

Fox Business: Australia's Qantas Airways plans to cut fares and launch an advertising blitz to win back passengers, a newspaper said, after its showdown with unions caused international travel chaos and left almost 70,000 travelers stranded.

Qantas flights returned to normal on Tuesday for the first time since it grounded its global fleet last weekend, a deliberate tactic to gain the upper hand over trade unions in a long-running and costly labor dispute. The tactic succeeded in spurring local authorities to order an end to all industrial action on Monday and should ensure a speedy resolution, but it also hurt the Qantas brand and left many passengers vowing to shun the airline in future.

Major rival Singapore Airlines Ltd (SIA), which competes with Qantas on a key Asian route to the UK, said its bookings had been strong since the Qantas grounding, especially for flights from Britain to Australia.

"Demand has been particularly strong for flights out of the UK and into Australia in recent days," SIA spokesman Nicholas Ionides said, although he was not aware of any noticeable new trend for bookings out to the Christmas-New Year holidays.

Aviation and brand experts say Qantas has a huge job to restore confidence in its brand, which has traditionally stood for safety and reliability.

"Qantas will cut prices across its international and domestic network, offer grounded passengers special promotional deals, and take out one of the biggest national advertising campaigns in its 90-year history in a bid to win back disenchanted travelers in the lead-up to the peak Christmas period," the Australian Financial Review said.

Qantas also planned to temporarily double the rate of frequent flyer points earned, the newspaper said in its unsourced report.

QANTAS SHARES UP, BUT RIVALS POUNCE

A Qantas spokeswoman described the newspaper report as speculation, but said the airline was apologizing to passengers. "We are also looking at some other customer care and engagement opportunities however we are still in planning stages and do not have any details at this time."

Qantas shares rose 1.1 percent in a weaker overall market on Tuesday, extending strong gains made on Monday. The stock has risen 5.5 percent since CEO Alan Joyce grounded the airline on Saturday, with investors judging it a tactical victory in a war with unions. Joyce also won support from AirAsia Bhd CEO Tony Fernandes, who said the move to ground the fleet was about survival.

"You have to salute Alan Joyce for doing what he's doing. This is not about workers versus management. It's about survival in the modern world," Fernandes said on his Twitter account.

The grounding created a national crisis, prompting Australia's labor-market tribunal to step in. On Monday, the tribunal gave both sides three weeks to settle the row or submit to its final ruling on the matter, a tight timeframe that investors believe is more likely to favor Qantas.

Before the grounding, Qantas said it had lost about A$70 million ($75 million) since September owing to the industrial action in its dispute with three trade unions over pay, working conditions and its plan to base more operations in Asia.

Joyce had complained of "death by a thousand cuts" at union hands. Qantas's estimates of the daily cost of a grounding suggests it lost another A$40 million at the weekend. Trade unions have accused Joyce of risking the airline to pursue a reckless industrial-relations strategy, and one union official has even spoken of a campaign of "civil disobedience" if workers fail to get justice at the tribunal.

Brand expert Tim Heberden, of consultancy Brand Finance, said fare discounting could help win back customers but Qantas needed to be very careful to repair any long-term damage. "I think Qantas will have to tread very carefully -- not just in the coming months but in the coming years -- to regain lost ground in terms of its reputation," he said.

Domestic rival Virgin Australia has been taking market share from Qantas during the months of union strife, taking aim at Qantas's more profitable business customers.

Credit ratings agencies Moody's and Standard & Poor's have both signaled possible credit downgrades for Qantas, citing the grounding and potential for lasting brand damage. Both agencies rate Qantas at the lower end of investment grade. Another rating agency, Fitch, said late on Monday there was "potential for management's showdown with labor to drive a material shift in passenger booking trends that could worsen the carrier's revenue performance in coming months".